The court denied a motion to dismiss one of multiple defendants from a qui tam case alleging healthcare fraud. The defendant argued the government merely disagreed with his medical opinion and that this could not form the basis of an FCA claim, but the court found the government clearly articulated that the drug, genetic, and psychological testing ordered by the defendant and billed to Medicare did not meet the criteria for reimbursement. The defendant also argued the government could not hold him vicariously responsible for billing submitted by other personnel or associated providers, but the government demonstrated that it intended to hold him personally responsible: for submitting his own false claims, for developing and approving corporate policy incentivizing the submission of false claims, and for turning a blind eye to misconduct when he was made aware of it.
Defendant Peter Kroll, M.D., moved the court to dismiss him as a defendant in four of seven claims in a qui tam case alleging fraud against Medicare, Medicaid, TRICARE, and other government healthcare programs.
Relators filed six qui tam cases alleging violations of state and federal false claims statutes, asserting theories of payment by mistake, unjust enrichment and fraud, against defendants Anesthesia Services Associates, PLLC d/b/a Comprehensive Pain Specialists, Peter B. Kroll, M.D., John Davis, Steven R. Dickerson, M.D., Gilberto A. Carrero, M.D., and Russell S. Smith, D.C. The United States of America and the State of Tennessee elected to intervene in part and filed a consolidated complaint.
Defendant Kroll is a medical doctor certified in anesthesiology and pain medicine. He took an ownership interest in CPS and began treating patients at CPS in August 2006. While the initial focus of CPS’ practice was anesthesia, by 2011, it was operating over 60 pain management clinics. Kroll served on the Board of Directors, was chairman and president of the board, and served as chief medical director beginning in January 2016, until the company dissolved in July 2018. In his role, Kroll was responsible for developing and approving policy.
The government alleged CPS submitted requests for reimbursement for diagnostic tests that were medically unnecessary, including certain drug testing and psychological testing. Kroll and other CPS providers also billed for acupuncture, a non-covered service, and then refused to refund the overpayment even after CPS brought this improper billing to their attention. The government also alleged Kroll personally submitted more than 2,500 claims to Medicare which falsely certified that he was the rendering provider, when in fact he was out of the country for these periods.
The government also asserted CPS paid Kroll and other owners a percentage from the pool of ancillary services revenues to which CPS providers contributed. According to the government, CPS ensured that its providers ordered at least six urine tests on every patient, pharmacogenetic blood tests, Health and Wellness panels, and iPad tests purportedly to measure depression and suicidal thoughts, and ancillary services whenever possible. Generally, the government argued CPS defrauded various healthcare programs by billing for non-reimbursable and medically unnecessary tests.
The government conceded that urine drug testing is medically necessary under certain conditions, but asserted that the defendants abused the testing to increase their billings, by ordering more expensive tests for every patient, rather than using medical judgment to determine on a case-by-case basis which patients required more advanced screening. The government provided evidence showing that CPS had been informed that routine blanket testing was not covered by Medicare and that advanced screenings could be reimbursed only when the findings of earlier tests indicated they were necessary.
The government noted that CPS had opened its own off-site testing facility, which allowed it to collect more testing revenue. The government also asserted CPS required its providers to send samples for qualitative testing under a billing code that carried a reimbursement rate of $100, rather than the $19.84 that would have been applicable if the testing had been done on-site.
The government also alleged that Kroll approved drug screening guidelines that required that all new patients to be tested and that all established patients receiving narcotics be tested at least six times per year. CPS also required its providers to sign a standing order on drug testing that would be done at CPS’ off-site lab. According to the complaint, CPS required providers to order quantitative testing from the outset, before they obtained results from the qualitative testing, even though if the drug screen was negative, there was no medical necessity for quantitative testing.
Further, the complaint asserted that CPS did not use the results of the drug testing for treatment. The government alleged CPS providers would frequently prescribe pain medication without having test results or without reviewing them. Therefore, prescribers could not know, for example, if a patient was not taking their pain medication or was taking too much.
According to the government, CPS was aware that the Centers for Medicare and Medicaid Services believed CPS was overutilizing UDT, because CMS had initiated an audit of payments based on the sheer number of UDT’s ordered by CPS. While its policies were under scrutiny, CPS issued revised guidelines stating that providers should only order UDT when medical necessity was established. However, a later policy still required even low-risk patients to receive a full set of UDT at least once per year, and a subsequent revision recommended testing at least six times per year for patients receiving narcotics.
Despite these policies and additional training, there was little reduction in the number of UDTs ordered. At one point, CPS’s compliance committee voted to fire a nurse practitioner due to her failure to change her practice of over-ordering UDT, but this decision as overruled because the employee’s ability to generate revenue. Eventually, CMS’s claims vendor placed seven of CPS’s providers on “prepayment review,” meaning that any claims submitted by these providers would not be processed until documentation confirmed that the services were medically necessary and properly reimbursable.
In 2017, CPS issued guidelines suggesting test frequency based on low, moderate, or high risk, and allowing providers to choose a complete test panel or a limited one, depending on medical need. In 2018, a new CMS claims vendor placed more stringent requirements for approval of UDT on CPS providers. At this point, CPS notified its providers that drug screen orders had to be placed after the patient had been seen by the provider, thus requiring an individual assessment of necessity. However, even though it should have been clear to CPS that it could not use a “panel” to order testing, virtually all the defendant’s locations continued the practice of using a standing order that incorporated bundles of drug tests, without regard to patient risk factors, from 2014 to 2018. The government submitted evidence of claims personally submitted by Kroll for unnecessary and non-reimbursable testing.
The government also alleged CPS submitted claims for medically unnecessary genetic testing that were not reimbursable based on CMS guidance. For example, the government asserted that CPS submitted claims for genetic blood tests that are supposed to be used only when the patients has acute coronary syndrome and had undergone specific therapies. However, in nearly every instance that CPS submitted claims for this testing, it failed to show medical necessity based on these guidelines.
The government also asserted CPS offered cash incentives to providers as an incentive to order this testing to be performed at a CPS facility. According to the complaint, CPS was aware that certain providers ordered excessive genetic testing, including some who ordered genetic testing on all new patients. The government asserted Kroll was aware of this situation.
The government also alleged CPS billed for psychological testing it knew was not reimbursable, and that the defendant offered a $5 bonus to providers for ordering these tests. CPS also pressured its staff to order the testing, for which reimbursement rates ranged from $19.88 to $50.43 per test during the relevant time frame. The government also alleged that CPS modified diagnoses to indicate the testing was necessary. In some instances, the tests were billed under Kroll’s provider number, even when he was not the rendering physician.
In his motion to dismiss, Kroll did not argue the allegations were not pleaded with sufficient particularity, nor contest the claims that alleged services were not provided. Rather, he argued that opinions about medical necessity cannot be objectively false; that the guidance issued by CMS vendors are non-binding and therefore cannot support an FCA claim; and that he could not be held vicariously liable for the claims submitted by other CPS employees.
First, Kroll argued that for a claim to be false under the FCA, it must be objectively false, and that the government merely second-guessed his medical judgment regarding the medical necessity of the tests he ordered. However, the court found this argument had been rejected in other venues, and recognized that FCA liability may be based on express false certifications that medical testing was reasonable and medically necessary. A doctor’s certification to the government that a procedure is reasonable and necessary is false under the FCA if the procedure was not reasonable and necessary under the government’s definition of the phrase.
In this case, the court found the government adequately alleged there was no medical need or basis for secondary drug testing on every patient tested nor for duplicative testing. The government also alleged CPS ordered genetic testing without a corresponding diagnosis and treatment that would have rendered it reimbursable, and ordered psychological testing that had no medical necessity and was not used in treatment. The court found those allegations sufficient to establish that CPS and Kroll personally submitted legally false claims.
The court also noted that Medicare coverage generally is limited to services that are medically reasonable and necessary. Thus, medically unnecessary nondiagnostic tests billed to the government can form the basis of an FCA claim. The complaint specifically alleged Kroll personally provided medically unnecessary services and provided examples of claims he submitted. At the pleading stage, this is all that is required.
The court also rejected Kroll’s argument that local coverage directives are non-binding and cannot form the basis of an FCA complaint. Kroll’s motion relied on his reading of Azar v. Allina Health Services. Kroll relied on Allina to support the proposition that an FCA claim cannot be premised upon non-compliance with an LCD, because LCDs are not promulgated in accordance with notice and comment procedures. However, the court noted that Allina did not concern LCDs and certainly did not establish that all LCDs set forth substantive legal standards, nor did it address the question of whether a false certification of compliance with an LCD may form the basis of a claim under the FCA. Moreover, the court noted the issue had not been briefed by either party.
Kroll also argued the government attempted to impose liability for purported violations of the LCDs that occurred before they went into effect. However, the court did not construe the complaint in this manner. Kroll also argued that he cannot be liable under the FCA based on any failure to comply with an LCD, because the complaint detailed his efforts to ensure CPS followed compliant policy and to change policy and practices. However, the court noted the complaint focused on CPS’s practices, which the government alleged did not change, regardless of any change in policy, until a CMS claims vendor instituted stricter oversight.
Finally, Kroll argued that he should not be held vicariously liable for the claims submitted by other providers or personnel during his tenure as owner and board member. In response, the government argued that it did not seek to hold Kroll vicariously liable, but personally liable for developing and approving CPS policy, for his awareness of the alleged improper billing, for his allowing false claims to be submitted, and for failing to attempt to provide reimbursement.
The court rejected Kroll’s argument, further noting that the FCA’s scienter requirement refers to both actual knowledge of fraud and reckless disregard of the truth. The complaint alleged both that Kroll personally submitted claims he knew to be false and developed policy that incentivized the submission of false claims. In fact, Kroll allowed other management personnel to overrule a decision to fire an employee for ordering medically unnecessary testing, because her billing practices were financially advantageous. The court found the government adequately alleged that Kroll personally submitted false claims and caused the submission of false claims.
